Abstract
Author(s): Ortobelli, Sergio; Rachev, Svetlozar; Schwartz, Eduardo | Abstract: This paper discusses two optimal allocation problems. We consider different hypotheses of portfolio selection with stable distributed returns for each of them. In particular, we study the optimal allocation between a riskless return and risky stable distributed returns. Furthermore, we examine and compare the optimal allocation obtained with the Gaussian and the stable non-Gaussian distributional assumption for the risky return. KEY WORDS: optimal allocation, stochastic dominance, risk aversion, measure of risk, a stable distribution, domain of attraction, sub-Gaussian stable distributed, fund separation, normal distribution, mean variance analysis, safety-first analysis.
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